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The stock market is at an all-time high! Must be a great time to
invest, right?

Uh, no. You should've been throwing all your money into the stock
market in the summer of 2009, just after it bottomed out, back
when the first part of the investing cliché "buy low, sell high"
was in play.

Not surprisingly, I'm seeing and hearing reports of supposedly
smart people (doctors and lawyers, ferchrissake) doing the
opposite. They sat on the sidelines for the last four years and
only now are jumping back into the market. Wall Street has a word
for these people: suckers.

Once again, market fluctuations are messing with average investors '
minds.

They panic and sell when prices drop, then fall victim to what
Alan Greenspan in 1996 called "irrational exuberance" and buy
when prices soar. That's a sure way to lose money.

Research from financial services firm Dalbar can tell us how
much. During the 20-year period ending in 2012, the S&P 500
index returned an annual average of 8.21 percent, but the average
person who invested in stock-market mutual funds earned only 4.25
percent.

Some of this loss was due to fees and expenses, as well as poor
choices by fund managers. But, according to Dalbar, about half of
this "disease of investor underperformance" can be attributed to
investors' psychological factors, including misplaced optimism
and loss aversion.

The lesson here is simple: To make money in the market, remove
the human element from the equation. Here's how.

Don't follow. If you do what everyone else is
doing, you're likely to get burned. That's how folks went bust
during the housing bubble, and it's how they lost big bucks
during the market collapse in 2008. Yet we do it anyway. It's in
our nature. Remember your big hair in the '80s? You were
following the herd.

When it comes to investing, consider the advice of Warren
Buffett: "Be fearful when others are greedy, and be greedy when
others are fearful."

Stick to your plan. Socking money away regularly
and automatically does pay off in the long run, even if the
market goes through the dramatic swings we've seen over the last
10 years. Keep in mind that the crash in 2008 didn't wipe out
those looking to retire; it simply delayed their retirement. With
the market now reaching new highs, people can stop working and
have a chance at a richer lifestyle than they would've enjoyed
had they cashed out five years ago.

Keep costs low. In his book Your Money and Your
Brain, Jason Zweig summarizes decades of research into one
investment truth: "The single most critical factor in the future
performance of a mutual fund is that small, relatively static
number: its fees and expenses."

To reduce costs (and to keep things simple), stick to index
funds, low-cost mutual funds designed to track the broader
movement of the stock market.

Ignore financial news. In Why Smart People
Make Big Money Mistakes, authors Gary Belsky and Thomas
Gilovich cite a Harvard study of investment habits. The findings?
"Investors who received no news performed better than those who
received a constant stream of information, good or bad."

If this reads like Investing 101, well, it is. But it bears
repeating when you consider this reality check: If you had done
nothing with your portfolio after the crash in 2008 except make
regular contributions to it, you'd be rewarded with a net worth
that's well above where it was before the crash. Funny how doing
nothing can make you look brilliant.